Listed property is still a safe harbour.

Posted On Sunday, 27 October 2002 10:01 Published by eProp Commercial Property News
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Amid choppy seas, the sector offers relative security, writes John Sukazi


Andre StadlerDESPITE higher interest rates, listed property will continue to attract investors looking for firmer ground amid a volatile trading environment.

André Stadler, managing director of Catalyst Securities, says the short-term outlook for property is good in spite of the high level of interest rates - 17% at present. This is because property yields are still attractive relative to cash.

'With equity market volatility and uncertainty over national economic growth, income return has assumed increasing importance,' he says.

'Property delivers a high percentage of total returns in the form of income distributions, with current yields in the sector averaging 15.5%.'

Stadler believes that listed real estate has come of age globally over the past 10 years, and South Africa is following this trend.

He says the market capitalisation of listed property in North America, Europe and Asia has grown to $288-billion - an indication that property has held up well in the face of equity market downturns.

'Market capitalisation of SA securitised property has doubled to R14-billion in the past two years. We expect the underlying trend to continue.'

The liquidity levels of SA property stocks have improved, with the annual value traded around R3.5-billion, equivalent to a quarter of the market capitalisation, he adds.

James Templeton, a property analyst at Barnard Jacobs Mellet, says the fundamentals of the property sector have improved marginally although the interest rates rises are yet to bite and oversupply of office space continues to affect property unit trusts and property loan stocks distributions.

BJM data indicates that, in the year to October 4, returns from property unit trusts were 5.9%, beating the R153 long bond's performance of 3.6% and that of property loan stocks at 2.2%.

Templeton says the sector is expected to produce significant returns over the next 12 months, but not at the same high levels expected from the JSE's all-share index.

Stadler says property income is relatively predictable because there are contracted leases normally lasting over three to five years.

'Listed property has the advantage of giving easy access to assets worth millions through the purchase of shares or units in trusts rather than the time-consuming and costly process of direct investment.'

He argues that the sector offers diversification into a spread of properties across various sectors of the economy and landscape, enhanced liquidity over direct property and access to specialist management.

Last modified on Monday, 28 April 2014 12:10

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